The Impact of Regulatory Changes on Third-Party Risk Management Strategies

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In today’s interconnected business landscape, organizations rely heavily on third-party vendors and suppliers to enhance their operations and drive growth. However, with the increasing number of data breaches and security incidents, regulatory bodies have introduced various measures to protect consumer information and ensure data privacy. As a result, regulatory changes such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) have significant implications for third-party risk management strategies.

1. General Data Protection Regulation (GDPR)

The GDPR, which came into effect in May 2018, is a comprehensive data protection regulation that applies to all organizations handling the personal data of European Union citizens. It introduces strict requirements for data protection and imposes significant fines for non-compliance. The impact of GDPR on third-party risk management strategies can be seen in the following ways:

Data Processing Agreements: Organizations are now required to have data processing agreements (DPAs) in place with their third-party vendors. These agreements outline the responsibilities of both parties regarding the processing and protection of personal data. Third-party risk management strategies need to incorporate the review and monitoring of DPAs to ensure compliance.

Vendor Due Diligence: Under the GDPR, organizations are responsible for ensuring that their third-party vendors are compliant with data protection regulations. This necessitates conducting thorough due diligence on vendors, assessing their data protection practices, and monitoring their compliance over time. Third-party risk management strategies should include robust vendor assessment and ongoing monitoring processes.

Breach Notification: The GDPR mandates that organizations report data breaches to the relevant supervisory authority within 72 hours of becoming aware of the breach. This requirement extends to third-party vendors who experience a breach while processing personal data on behalf of an organization. Third-party risk management strategies should address the timely reporting and communication of data breaches to ensure compliance with this requirement.

2. California Consumer Privacy Act (CCPA)

The CCPA, which came into effect in January 2020, is a state-level privacy law in California that grants consumers certain rights over their personal information. While it primarily applies to businesses operating in California, its impact extends beyond state borders due to the interconnected nature of the digital economy. The CCPA has the following implications for third-party risk management strategies:

Consumer Rights: The CCPA grants consumers the right to know what personal information is being collected about them, the right to opt-out of the sale of their personal information, and the right to request the deletion of their personal information. Organizations must ensure that their third-party vendors respect these rights and have mechanisms in place to facilitate consumer requests. Third-party risk management strategies should incorporate processes for assessing vendor compliance with these consumer rights.

Data Minimization: The CCPA emphasizes the principle of data minimization, requiring organizations to collect and retain only the personal information necessary for the purposes disclosed to consumers. Third-party risk management strategies should include measures to assess vendor data collection and retention practices to ensure compliance with this principle.

Contractual Obligations: The CCPA requires organizations to have specific contractual provisions in place with their third-party vendors to ensure compliance with the law. These provisions include restrictions on the vendor’s use of personal information and requirements for the vendor to assist in responding to consumer requests. Third-party risk management strategies should incorporate the review and monitoring of these contractual obligations.


The regulatory changes brought about by the GDPR and CCPA have a significant impact on third-party risk management strategies. Organizations must adapt their strategies to incorporate the requirements and obligations imposed by these regulations. By ensuring compliance with data protection and privacy regulations, organizations can mitigate the risks associated with third-party vendors and maintain the trust of their customers.

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